Razak v. Uber Techs., Inc.

• Decision Date: 03 March 2020
• Docket Number: No. 18-1944,18-1944
• Citation: 951 F.3d 137
• Parties: Ali RAZAK; Kenan Sabani; Khaldoun Cherdoud, individually and on behalf of all others similarly situated, Appellants v. UBER TECHNOLOGIES, INC.; Gegen, LLC
• Court: U.S. Court of Appeals — Third Circuit

951 F.3d 137

Ali RAZAK; Kenan Sabani; Khaldoun Cherdoud, individually and on behalf of all others similarly situated, Appellants

v.UBER TECHNOLOGIES, INC.; Gegen, LLC

No. 18-1944

United States Court of Appeals, Third Circuit.

Argued January 15, 2019

Opinion Filed: March 3, 2020

Jeremy E. Abay, John K. Weston, Sacks Weston Diamond, 1845 Walnut Street, Suite 1600, Philadelphia, PA 19103, Ashley Keller[ARGUED], Seth A. Meyer, Keller Lenkner, 150 North Riverside Plaza, Suite 2570, Chicago, IL 60654, Counsel for Appellants

Sharon M. Dietrich, Community Legal Services, 1424 Chestnut Street, Philadelphia, PA 19102, Amicus Appellants

Sophia Behnia, Littler Mendelson, 333 Bush Street, 34th Floor, San Francisco, CA 94104, Wendy S. Buckingham, Paul C. Lantis, Littler Mendelson, 1601 Cherry Street, Suite 1400, Three Parkway, Philadelphia, PA 19102

Robert W. Pritchard[ARGUED], Joshua Vaughn, Littler Mendelson, 625 Liberty Avenue, EQT Plaza, 26th Floor, Pittsburgh, PA 15222, Andrew M. Spurchise, Littler Mendelson, 900 Third Avenue, 8th Floor, New York, NY 10022, Counsel for Appellees

Gabriel K. Gillett, Jenner & Block, 353 North Clark Street, Suite 4500, Chicago, IL 60654, Adam G. Unikowsky, Jenner & Block, 1099 New York Avenue, Suite 900, Washington, DC 20001, Amicus Appellees

Before: SMITH, Chief Judge, GREENAWAY, JR., and PORTER, Circuit Judges.

OPINION

GREENAWAY, JR., Circuit Judge.

This case is an appeal from a grant of summary judgment on the question of whether drivers for UberBLACK are employees or independent contractors within the meaning of the Fair Labor Standards Act("FLSA"), 29 U.S.C. §§ 201 – 219, and similar Pennsylvania state laws.For the following reasons, we will vacate the District Court’s grant of summary judgment and remand for further proceedings.

I.Facts¹

PlaintiffsAli Razak, Kenan Sabani, and Khaldoun Cherdoud²(collectively, "Plaintiffs") are Pennsylvania drivers who utilize Defendant Uber Technologies’ ride-sharing mobile phone application ("Driver App").Plaintiffs bring this action on behalf of a putative class of all persons who provide limousine services, now known as UberBLACK, through Defendant’s Driver App in Philadelphia, Pennsylvania.³Plaintiffs bring individual and representative claims against Uber Technologies, Inc. and its wholly-owned subsidiary, Gegen, LLC, ("Gegen," and collectively, "Uber") for violations of the federal minimum wage and overtime requirements under the FLSA, the Pennsylvania Minimum Wage Act ("PMWA"), and the Pennsylvania Wage Payment and Collection Law ("WPCL").

Plaintiffs Razak, Sabani, and Cherdoud each own and operate independent transportation companies ("ITCs")⁴ Luxe Limousine Services, Inc. ("Luxe"), Freemo Limo, LLC("Freemo"), and Milano Limo, Inc.("Milano"), respectively.In order for drivers to contract to drive for UberBLACK, they must form ITCs.Each ITC, in turn, enters into a Technology Services Agreement with Uber.The Technology Services Agreement includes a Software License and Online Services Agreement that allows UberBLACK drivers to utilize the technology service Uber provides to generate leads, as well as outlines the relationship between ITCs and Uber riders, ITCs and Uber, and ITCs and their drivers.Additionally, it describes driver requirements, vehicle requirements, financial terms, and contains an arbitration clause for dispute resolution between ITCs and Uber.

Uber also requires that drivers sign a Driver Addendum,⁵ which is a legal agreement between the ITC and the for-hire driver, before a driver can utilize the Driver App.The Driver Addendum allows a driver to receive "lead generation and related services" through Uber’s DriverApp. App. 409.The Addendum also outlines driver requirements (such as maintaining a valid driver’s license), insurance requirements, dispute resolution, and the "Driver’s Relationship with Uber," in which Uber uses clear language to attempt to establish the parameters of the Driver’s working relationship with Uber.⁶ App. 411.For UberBLACK, Uber holds a certificate of public convenience from, and is licensed by, the Philadelphia Parking Authority ("PPA") to operate a limousine company.Transportation companies and individual transportation providers who provide Black car services in Philadelphia are required to hold a PPA certificate of public convenience or associate with an entity that holds such a certificate.Some UberBLACK transportation providers operate under the PPA certificate held by Uber.Luxe, an ITC owned by Razak, operates under its own PPA certificate.Additionally, approximately 75% of UberBLACK drivers use Uber’s automobile insurance.

Plaintiffs claim that they are employees, and sue Uber for violations of minimum wage and overtime requirements under federal and state laws.Under the FLSA, employers must pay employees the applicable minimum wage for each hour worked, and, if an employee works more than forty hours in a given week, the employer must pay one and a half (1 ½) times the regular rate for each hour subsequently worked.29 U.S.C. §§ 206 – 207.Plaintiffs contend that time spent online on the Uber Driver App qualifies as compensable time under the FLSA.Principal among Plaintiffs’ arguments is that Uber controls the access and use of the Driver App.

To access Uber services, drivers open the Driver App on a mobile device, log in, and tap a button to be online.Once online, a driver can choose to accept a trip, but if the driver does not accept the trip within fifteen seconds of the trip request, it is deemed rejected by the driver.The Driver App will automatically route the trip request to the next closest driver, and if no other driver accepts the trip, the trip request goes unfulfilled, as Uber cannot require any driver to accept a trip.UberBLACK drivers are free to reject trips for any reason, aside from unlawful discrimination.However, if a driver ignores three trip requests in a row, the Uber Driver App will automatically move the driver from online to offline, such that he cannot accept additional trip requests.

Uber sets the financial terms of all UberBLACK fares, and riders pay by having their credit cards linked to the App.After a ride is completed, Uber charges the rider’s credit card for the fare.Uber then deposits the money into the transportation company’s Uber account with a commission taken out by Uber.The transportation company then distributes the payment to the driver who provided the ride.

Uber also has regulations under which it logs off drivers for a period of six hours if the driver reaches Uber’s twelve-hour driving limit.Trip requests are generally sent to the driver closest in proximity to the requesting rider, and drivers have no way of knowing from the Uber Driver App what the demand for drivers is at any given time (and thus, how much their earnings will be based on that demand).Drivers also do not know where a rider’s final destination is prior to accepting the ride.

There is one exception affecting a driver’s ability to accept trip requests from anywhere in Philadelphia.If a driver is at one of Philadelphia’s major transportation hubs: 30th Street Train Station or Philadelphia International Airport, he must utilize a "queue" system that routes trips to the next driver in the queue, and the driver can only enter, or advance in, the queue while physically located inside a designated zone.

On appeal, Uber reasserts that Plaintiffs are not employees as a matter of law, and therefore, their putative class action should be subject to summary judgment.To support this contention, Uber portrays UberBLACK drivers as entrepreneurs who utilize Uber as a software platform to acquire trip requests.Uber asserts that Plaintiffs are not restricted from working for other companies, pay their own expenses, and on some occasions, engage workers for their own ITCs.They can use UberBLACK as little or as much as they want or choose not to work for UberBLACK and instead work for competitors such as Blacklane and Lyft.

Uber asserts that it places no restrictions on drivers’ ability to engage in personal activities while online.Plaintiffs in this matter engaged in a range of personal activities, including accepting rides from private clients, accepting rides from other rideshare programs, sleeping, running personal errands, smoking cigarettes, taking personal phone calls, rejecting UberBLACK trips because they were tired, and conducting personal business.

Alternatively, Plaintiffs claim that they are "employees" under the FLSA because they are controlled by Uber when they are online and perform an integral role for Uber’s business.The District Court agreed with Uber’s position, and granted Uber’s Motion for Summary Judgment on the question of whether Plaintiffs qualify as "employees" of Uber under the FLSA and PMWA.Plaintiffs now appeal from the summary judgment order.

II.Procedural History

Plaintiffs commenced this action in the Court of Common Pleas of Philadelphia County on January 6, 2016.Defendants successfully removed the action to the United States District Court for the Eastern District of Pennsylvania asserting federal question and diversity jurisdiction.Uber moved to dismiss the case and compel arbitration.Alternatively, as a separate matter, Uber moved to stay this action.The District Court denied both motions, concluding that Plaintiffs had complied with the arbitration opt-out procedures allowed by the Technology Services Agreement.Uber then moved for judgment on the pleadings, which the District Court granted in part and denied in part.The District Court found that Plaintiffs alleged sufficient facts to support that they were "employees" instead of "independent contractors," such that judgment on the pleadings was not appropriate.

Plaintiffs filed an Amended Complaint on October 13, 2016, and Uber moved to dismiss Plaintiffs’ Amended Complaint in its entirety, as well as moved to strike certain portions of the Amended Complaint in the alternative.The...